I suppose that Dalton means that this only happens on T2, and not on any other tool and isn't that strange if that should be the encoder!?
Anyhow, to adjust the spindle orientation in my Fanuc MXP-100i at work it's the value in par.4077, but you need to check wich par for your control in your manual!
If it has with "Big Tool Set" to do, you do that settings in DGN, but again you must check you're manual.
Kitamura Mycenter 1 -83 with Fanuc 3M-C and Mycenter 1B -85 with 10M control.
Yes, they are old..... but i still like them!